Information
Deeds of Variation
Introduction
This information sheet sets out for general
guidance the main features of Deeds of
Variation and their tax implications. There
is also some brief commentary about
Disclaimers by beneficiaries. A number of
important and technical points arise.
Specific advice should be obtained before
action is taken in any particular case.
What is a Deed of Variation?
The term Deed of Variation (which has
replaced the expression Deed of Family
Arrangement) is normally used to refer to
post-death variations or rearrangements of
wills, intestacies and certain other
dispositions taking effect on death.
A beneficiary who is entitled to part of a
deceased person's estate under a will or
intestacy or in other ways (for example,
property held in a joint tenancy passes by
survivorship) may change the way the
inherited assets are owned by means of a
Deed of Variation.
The popular notion that it is possible to vary
the will itself (or the law of intestacy or the
doctrine of survivorship) is a misconception
since the will itself cannot be varied after the
Head Office
testator has died. It is, however, possible
Heathervale House
2-4 Vale Avenue for an original beneficiary to sign a Deed of
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F 01892 540170 By means of a statutory fiction, HM
Revenue & Customs will, if required, treat
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deceased person and not by the original
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Crossways Business Park beneficiary for all Inheritance Tax purposes
Dartford and some Capital Gains Tax purposes but
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not in any other respect.
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There are many reasons why beneficiaries
may wish to vary or redirect assets held in a
deceased person's estate. Some of the
main reasons are:
1 to save Inheritance Tax;
2 to provide for someone who has been
omitted from the will or who has not
been given adequate financial provision
in the will;
3 to alter gifts under a will, for example to
enlarge a life interest into an outright or
absolute interest;
4 to redirect the deceased's share of a
jointly owned asset which would
otherwise pass to the surviving joint
tenant (further details about jointly
owned assets are to be found in the
information sheet Jointly Owned
Property: Joint Tenants or Tenants in
Common?);
5 to resolve any uncertainty or defect in
the will.
It is not always possible to vary the
dispositions effected by a will or otherwise.
A Deed of Variation requires the consent of
all beneficiaries who are interested in the
asset which is to be redirected. Problems
are likely to arise if some beneficiaries are
under 18, or any greater age specified in a
will.
What is a Disclaimer?
A Disclaimer is a refusal to accept an
inheritance under a will or intestacy. To be
valid, a Disclaimer must be made before
acceptance of any income or other benefit
from the deceased person's estate.

Deeds of Variation
(continued)
The law relating to Disclaimers is technical
and obscure, and it is normally preferable to
have a Deed of Variation instead. When a
Disclaimer is effected, the inheritance
passes according to fixed rules of law. It is
not possible to disclaim in favour of a
particular person. Hence, if a specific gift is
disclaimed, it will fall into the residue of the
estate. If it is the residue itself which is
disclaimed, it will pass under the law
relating to intestacy. An inheritance can
also be disclaimed on intestacy. A
Disclaimer is, therefore, an all or nothing
matter. It is not generally possible to retain
part of a gift, and disclaim the rest.
Disclaimers are not considered further in
this information sheet.
Main requirements
If a Deed of Variation is to take
retrospective effect for the purposes of
Inheritance Tax and/or Capital Gains Tax,
certain conditions must be satisfied. The
main conditions are:
1 the deed must be completed within two
years after the death;
2 the deed must be signed by any actual
or potential beneficiary whose original
position is affected by the variation and
(if more Inheritance Tax is payable) by
the executors or administrators;
3 the appropriate tax statements must be
contained in the deed;
4 if the variation is in favour of charitable
purposes then notice must be given to
the charity(ies) or trustees concerned;
5 the Deed of Variation must be genuine
and not a sham;
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6 no extraneous payment should be made
to induce a beneficiary to sign a Deed of
Variation, but an exchange of
inheritances by beneficiaries is
acceptable;
7 it is not possible to carry out more than
one variation in relation to the same
asset, but several variations in relation to
different parts of an estate are
permissible;
8 a Deed of Variation can be effected even
if the administration of the estate has
been completed and assets have been
distributed, and it is also possible to sign
a Deed of Variation before a grant of
representation has been obtained.
Main tax implications
1 Inheritance Tax (IHT)
The main effect of a qualifying Deed of
Variation is that the alterations made by it
are treated for all IHT purposes as having
been effected by the deceased person and
not by the original beneficiary. Thus, if an
asset is directed away from the deceased's
spouse*, more IHT may be payable, but if it
is given to the spouse or to a charity, the
IHT bill may be reduced. The IHT anti-
avoidance provisions relating to gifts with
reservation of benefit do not generally apply
if the original beneficiary retains an interest
in the redirected asset.
2 Capital Gains Tax (CGT)
A variation made for CGT purposes does
not constitute a disposal by the original
beneficiary. Furthermore, those who take
assets under the Deed of Variation will
acquire them as legatee at probate value

Deeds of Variation
(continued)
(i.e. the market value at the date of death)
for future CGT purposes.
It is possible for a variation to be made for
IHT but not CGT purposes, and vice versa.
3 Income Tax
A Deed of Variation is not generally
retrospective to the date of death for Income
Tax purposes and is only effective from the
date of signature.
However, there can be some retrospective
effect for Income Tax purposes if the Deed
of Variation relates to the residue of an
estate which is still in the course of
administration. By way of illustration, if a
testator dies on 1 June 2020 and his widow
signs a Deed of Variation on 1 December
2020 redirecting the whole of the residuary
estate to her adult son, no part of the
residuary income will be assessed on the
widow unless the executors have previously
paid a sum to her in respect of her original
entitlement.
Since a Deed of Variation will not be treated
as a disposition by the deceased person for
Income Tax, a beneficiary who sets up a
trust by means of such a deed will be
treated as the "settlor" for the purposes of
that tax. This has two important
implications:
a if the person making the variation (or
their spouse) is an actual or potential
beneficiary of the trust, all trust
income will normally be taxed as their
income during their lifetime (whether
or not it is distributed);
b even if neither the settlor nor their
spouse is a beneficiary under the
trust, if the variation is in favour of the
settlor's children, if the children
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receive distributions of income (or of
capital to the extent, if any, that
income has been accumulated) while
they are unmarried and under the age
of 18 then those distributions will be
taxed in the settlor’s hands.
Conclusion
A Deed of Variation can present a major tax
planning opportunity. It should be
considered in virtually all cases. For
example, a beneficiary may wish to set up a
Discretionary Trust from which he or she
can be eligible to benefit but which should
escape IHT on the beneficiary's death.
Disclaimer
This information sheet is written as a
general guide. As any course of action
must depend on your individual
circumstances, you are strongly
recommended to obtain specific
professional advice before you proceed.
We do not accept any responsibility for
action which may be taken as a result of
having read this information sheet.
If you require further information, please
contact Stuart Goodbody or Mark Politz on
01892 510000 or by email at:
stuart.goodbody@ts-p.co.uk
mark.politz@ts-p.co.uk
* All references to the term 'spouse' include
a civil partner as defined by Section 1 of the
Civil Partnership Act 2004
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